L.A. sues Health Net over cancellations

The Los Angeles city attorney has filed suit against Health Net, one of the state of California's largest health insurers, contending it engaged in an illegal, secret campaign to drop patients with individual policies if they needed costly care. Meanwhile, the city attorney also is opening a separate criminal investigation into the health plan's practice of paying employee bonuses partly based on how often they could cancel policies for individually-insured members submitting large claims.

In the current suit, attorneys argue that Health Net defrauded thousands of policyholders, as the policies it sold them are of virtually no value if the plan cancels coverage when consumers need them. The suit contends that the company's business practices routinely violate more than 20 state laws, including a prohibition against canceling policyholders for making inadvertent mistakes on applications. If the city attorney succeeds in his suit, he could theoretically collect a fine for each of at least 100,000 individual policies the health plan has sold over the past four years, which could mount up into hundreds of millions of dollars. This is only the most recent legal tangle between Health Net and government regulators. Prior to this, Health Net was hit with a $1 million fine by state regulators when it lied twice to state investigators about the employee bonus program.

To learn more about the city's case against Health Net:
- read this Los Angeles Times article

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